How do debt management companies work?
Written by Sam Critten on 28 May 2019
When you’re in debt, it can seem like the whole world is against you. Letters from your creditors asking for money, constant phone calls asking when you’re going to pay off your debt, emails every day asking when you’re going to make up for your missed monthly payments…not many people could blame you for wanting help if you’re the one on the receiving end.
If this sounds like you, then perhaps it’s time to call a debt management company.
What is a debt management company?
A debt management company – like PayPlan – can help make being in debt, and getting out of it, a whole lot easier than it would be if you’re trying to manage it on your own.
The main thing we do for people is provide them with a debt solution, which is essentially a repayment plan that can help you pay off your debt in a more balanced, fair and structured way. If you choose to allow us to help you with your debts, we’ll recognise the situation you’re in and see what the most appropriate debt solution would be for your circumstances.
When you’re in a debt solution we’ll also take the hassle of paying your creditors out of your situation too. A debt management company takes a single, monthly payment from you then pays this money directly to your creditors. We’ll distribute the money from your monthly payments between your creditors depending on how much you owe them.
If you owe creditor A £10,000, for example, and creditor B £5,000, then we’ll give creditor B half as much from your monthly payment as we would give to creditor A.
We also give free, expert debt advice to anyone who needs it. If you’re worried about calling us for fear of embarrassment, then don’t; all of our calls are handled by highly trained, compassionate advisers, and you can also speak to them anonymously if you wish by calling 0800 280 2816.
How much debt do I have to be in for you to help me?
If you’ve got a relatively low level of debt then you might not be suitable for one of our debt management plans, but we’ll still be happy to give you free, expert debt advice whenever you call us.
Are there debts you can’t help with?
Again, it depends who you talk to. We can’t speak for every debt management company out there, so it’s worth speaking to a debt management company to ask what debts they can help with before you decide to enter into a debt solution with them. The debts we help our clients to pay off range from credit cards, store cards, personal loans, private rent arrears or even just general overspending.
Can you stop my creditors from hassling me?
It depends what debt solution you’re in.
If you enter an Individual Voluntary Arrangement (IVA), for example, your creditors, by regulation won’t be able to contact you at all until your plan’s finished. If you enter into a Debt Management Plan (DMP), on the other hand, then there’s no regulation preventing your creditors from contacting you. However, if your creditors can see you’re addressing your financial situation by entering into a debt solution, they may take a step back from contacting you so regularly.
If you enter into a DMP, we can also request that your creditors reduce interest rates and freeze charges on your account.
Do your debt management plans cost money to set up?
We pride ourselves in being one of the few debt management companies in the UK who offer completely free, no-hidden-charges-involved debt management plans. Not all debt management companies are like this – you can compare the fees that different debt management companies charge by clicking here.
Some debt solutions we advise on, like IVAs, do incur a fee, but they don’t cost you anything personally. You can find out more about fees and costs by clicking here.
Can you write off any of my debt?
We certainly can.
Entering into an IVA means you can write off as much as 80% of your debt, as well as giving you a period of time (usually five years) by the end of which you’ll be debt free. Not sure how much you could write off? We’ve created an interactive slider that shows you exactly how much debt you could write off your current debt total – you can use it now by clicking here.
We’ve outlined some of the pros and cons here but before deciding to enter a debt solution, you should always seek professional advice. It’s important to think carefully about a range of options before picking one, so you can make sure you have the best chance to get free from debt.
Filed under Debt Facts